If You’re Paying Too Much for Your Car Loan, it’s Probably Not Your Fault. And There’s a Solution.

Buying a new car can be exciting. It can also be frustrating.  Surveys have shown that American car buyers usually have mixed emotions about shopping for and purchasing their vehicles.  

In this piece we’ll discuss:

  • Customer satisfaction levels during various phases of the typical process of a car purchase.
  • The link between the typical car dealership’s Finance sales process and the large population of American drivers who are paying too high an interest rate and monthly payment for their car loan.
  • Borrowers can improve their situation by refinancing their auto loans.

Have a look at the graph below, which plots car buyer happiness over the course of the most common new car-buying process: the 90-minute purchase experience at a typical car dealership.

Did you notice that buyers tend to be happiest when they test drive the vehicle? Of course! The feel of the steering wheel, the smell of the interior and the acceleration are just a few of the sensory highlights we love when considering a new purchase. A recent Autotrader poll reported 81% of car buyers rated their satisfaction levels from 8 to 10 during the test drive. It’s fun to try out a new car that might soon be yours.  

No wonder Autotrader also reported a decline in buyer happiness during the negotiation phase. While some buyers like to negotiate, there is a stark contrast for most of us between the feel of a new car and the ordeal of haggling over hundreds or thousands of dollars. Some buyers are unfamiliar with haggling, and don’t know how much is too much car payment. 

The negotiation reaches a welcome end for buyers once they agree with the car dealership on the price they’ll pay, causing a temporary satisfaction bump.  

What happens next? Behold, the “unhappy valley” of the Finance and Insurance (F&I) phase. Frequently characterized by waiting, and then listening to the finance manager pitch unwanted vehicle protection products, the F&I process converts the “buyer” to a “borrower.” It is almost always the customer’s least satisfying experience when buying a new car.

How unfortunate that we’re under such stress when choosing the auto loan we’ll sign to finance our car purchase! It stands to reason that this unhappy experience typically leaves with a higher APR (interest rate) and monthly car payment than they should have.  

By the time car buyers are in the F&I phase of the process, they are tired and just want to get out of the dealership. So their guard is down when the dealer shows them financing options, and steers them to “go with the largest lender.” Why are buyers steered this way? Because dealers are incentivized, typically by their two or three biggest lenders, to originate as many loans as possible for those lenders each month. 

The truth is, vehicle buyers usually don’t know about the lowest-APR car loan available because the typical dealership experience makes it very difficult to find them.  

But there is hope! Buyers who have made on-time monthly payments and have decent credit can refinance their overpriced car loans! As their credit score improves and their monthly payments are made on time, the likelihood of a better car loan increases. They can replace their high-APR, high monthly payment auto loan with something more affordable.

Find your lower-cost loan by starting your refinance process at www.pacecar.com. We will help you understand your current vehicle value, your Loan-to-Value ratio and match you with the best lender for you. You deserve a better loan, and Pacecar can help you find it.

By Casey Harmon

Casey Harmon is the Co-Founder and CEO of Pacecar Inc. Before founding Pacecar, Casey held various executive positions at Westlake Financial and Toyota Financial Services. He has an MBA from UCLA Anderson and a BA from Stanford. Casey believes all American car drivers should have access to the best loan terms available. Casey lives in the Los Angeles area with his wife and two children.



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